Retail sales warm up slightly, but underlying conditions remain cool

Retail sales growth picked up in the year to November after growth largely stalled in October.

Still, retailers are feeling the pinch, with continued weakness in investment intentions, employment, and business optimism. That’s according to the latest CBI Quarterly Distributive Trades Survey.

The survey of 104 firms, of which 47 were retailers, showed sales volumes grew at a pace broadly in line with the long-run average in the year to November. Retailers expect sales volumes to expand at a roughly similar pace in the year to December. Orders placed on suppliers recovered in the year to November, following a fall in October, and are expected to grow at a similar pace next month. However, sales remained below average for the time of year, although to a lesser degree than last month.

Growth in annual internet sales volumes slowed in November compared to October. Retailers expect a slight pick-up in internet sales growth in the year to December.

Employment in the retail sector declined for the eighth quarter in a row in the year to November, but at a slower pace than in the year to August. Average selling prices grew at a slower pace in the year to November compared to August but, are still far above the long-run average. Prices are expected to increase at a similar pace in December.

Meanwhile, retailers’ investment intentions were roughly flat, following two consecutive quarters of falling investment. But firms expect their business situation to worsen in the next three months for the third quarter in a row.

Momentum in the retail sector is likely to remain relatively subdued going forward, as firms continue to grapple with weak household income growth and structural changes posed by digital disruption. For more detail on our broader view of the economic outlook, see our June economic forecast.

Anna Leach, CBI Head of Economic Intelligence, said:

“While it is encouraging to see headline retail sales growth strengthen in November after a weak outturn in October, the quarterly survey continues to paint a gloomy picture of the sector. Business sentiment remains poor, investment intentions are flat, and headcount continues to decline.

“Firms have been resilient during this period of seismic uncertainty, protecting livelihoods across the country, but it has nonetheless cost investment and jobs, hitting the most vulnerable hardest. So, the increase to the Annual Investment Allowance and the business rates reform for SMEs is a small mercy for our high streets.

“What’s needed now is securing a transition period that will remove a calamitous ‘no deal’ cliff edge and provide firms with breathing room. The Withdrawal Agreement is hard won progress; let’s not go backwards.”

Key findings:

Retailers:

36% of respondents reported that sales volumes were up in the year to November, while 17% said they were down, giving a balance of 19%

Retailers expect sales volumes to pick up next month (+22%), with 34% expecting them to rise and 12% to fall

Sales were poor for the time of year in November, with a balance of (-10%), an improvement on October (-22%)

The volume of orders placed upon suppliers recovered in November, with 36% of survey respondents reporting a rise and 21% reporting a fall, giving a balance of +15%. Firms anticipate that orders will grow at a similar pace next month (+15%)

Retailers expect their overall business situation to deteriorate over the next three months (-9%)

Investment intentions for the next 12 months compared with the last 12 months in November were roughly flat (-3%) following a decline in in August (-10%)

Average selling price inflation slowed in the year to November (+58%) relative to August (+70%). Price growth is expected to continue at a similar pace in the year to December (+58%)

Year-on-year growth in internet sales volumes (+36%) slowed from last month (+56%), but is expected to quicken slightly in December (+42%)